Evidence of Naked Short Selling? Hardly.

Drunk Patrick ByrneThe tinfoil hat-wearing crew over at Deep Capture thinks they’ve finally demonstrated an actual case of Naked Short Selling damaging a company.  (They’ve been asked repeatedly to prove that naked short selling has ever severely damaged a company, and have yet to produce proof that any such thing has happened.)

What they’ve instead demonstrated is what an utter moron Patrick Byrne, the incompetent CEO of Overstock.com (NASDAQ:OSTK) is.  Maybe this most recent article written by Byrne is definitive proof of why Overstock.com cannot turn a profit and has to resort to fraudulent financial frolicking to make it seem like they’re doing something right.

Feast your eyes on this…

In an “article” on the Deep Capture website, Byrne says something to the effect of… Haha….. I finally will show you proof of the damaging effects of naked short selling (NSS) on a company called Dendreon.

The story of Dendreon (NASDAQ:DNDN) is simple.  The company is working on cancer treatments, and the research costs a lot of money. Dendreon’s fate seems to hang on one particular cancer treatment: Provenge, a prostate cancer treatment.

In 2007, Dendreon was seeking FDA approval for Provenge. As of the end of March 2007, it looked like the drug would be approved by the FDA.  Surprise, surprise, the company’s stock price shot up in anticipation. By early May 2007, it was clear that FDA approval was not going to happen any time soon. Again, the movement of the stock price was not shocking. There was a sharp drop-off.

This all seems elementary, right? For a company that specializes in cancer treatments, they basically live or die by FDA approvals. It comes as no surprise to any person with an ounce of brains that the stock price is going to follow serious FDA action.

Hence my conclusion that Patrick Byrne has no brains…. He instead opines that Dendreon’s falling stock price was actually related to naked short selling of the company’s stock. Byrne says:

It turns out that the collapse of DNDN from over $20 to that $5 price was accompanied by massive levels of naked shorting. At one point, 18 million shares were unsettled (about 20% of the ownership of the company).

But wait! Maybe Byrne’s not as dumb as he sounds. Because then he says this:

As is so often the case, manipulations in Dendreon stock coincided with all that we have come to expect: surprise rejection of its drug Provenge by the FDA, endless bashing from the likes of the Media Mob and Jim Cramer the Self-Confessed Crook, and other strange incidents soon to be explored by my Deep Capture colleague, journalist Mark Mitchell.

Really? Byrne understands that there was a huge event (the FDA rejection), yet doesn’t attribute changes in the stock price to that? Instead, the stock price of Dendreon is a result of bashing? (And I’m pretty sure that once the company got the FDA rejection, there would be few positive things for the media to say. Does that mean that negative coverage is automatically deemed “bashing”?)

Surely Byrne understands the direct impact of the FDA action on the stock price? Unfortunately, he apparently does not. (Again… all aboard the clue train as to why Overstock.com is perpetually in the red when being run by a clown like this.)

Possibly even funnier, is Byrne’s assertion that this chart proves his point. He says that massive naked short selling (allegedly shown by lots of dark blue on the chart) caused Dendreon’s stock price to fall. (Click on the chart to see it full size.)


There’s only one teensy problem with Byrne’s assertion that the alleged naked short selling demonstrated on the chart made the stock price fall…. The fact that during the times when there’s lots of dark blue on the chart, the company’s stock price is higher than the months before or after that period.

Byrne’s own data proves nothing about naked short selling. It only proves he’s a moron. Lest Patrick Byrne needs any further proof that the stock price of a company like this follows FDA actions, he should check out the current activity. FDA approval of Provenge is looking more promising. And Dendreon’s stock price has shot way up again. Amazing how these things work, isn’t it?


  1. Pingback: Wiki Fudges Importance of Naked Short-Selling | LILA RAJIVA: The Mind-Body Politic

  2. Sean Gillhoolley

    I do not understand the complexities of the market well enough to truly understand all of the arguments being made by the “beware naked short selling” crowd, but my gut tells me they are right. Why should anyone be allowed to sell a stock they do not own, and have never borrowed? Not only does it provide a loophole that can be exploited to suck the value out of a company, but it can be used to manipulate corporate elections.

    It took me a while before I came upon the DeepCapture site. My first exposure to this crime came from a site called “Gaming The Market”, which I linked to from the Huffington Post. Through Gamingingthemarket.com I came upon a lengthy and technical explanation of what was going on at Youtube.com.

    At this point I have to wonder why someone would be so vehement in their assertion that naked short selling is just fine. Nothing to see here folks, move along. Me think you doth protest too much. I suspect you have a vested interest in keeping the party going until all of the beer is gone.

    Sean Gillhoolley

  3. Tracy Coenen

    Sean – I don’t think anyone here is saying that naked short selling isn’t wrong. It is wrong. There are laws that prohibit it. What I take issue with is the assertion by Byrne and his cohorts that naked short selling is happening on a massive scale and has been the downfall of even one company. They still haven’t proven that, and they’ve been ranting about it for at least two years. I’d be happy to write about the facts behind a company being decimated by naked short selling. Find one. Prove to me that it happened. And I’ll be happy to write extensively about it.

  4. Pingback: Evidence of massive naked short selling. Or not. | Sequence Inc. Fraud Files Blog

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